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Update on the China International Commercial Court﻿

13 May Update on the China International Commercial Court﻿

[Matthew S. Erie is an Associate Professor of Modern Chinese Studies and a Fellow at St. Cross College at the University of Oxford.]

In 2018, China began setting up the China
International Commercial Court (CICC), the first judicial institution in the
People’s Republic of China (PRC) specifically designed to adjudicate
cross-border commercial disputes touching on matters of foreign law. The CICC
is also regarded as the first legal institution designed to support the “Belt
and Road Initiative,” China’s multi-trillion dollar project to promote economic
integration across Eurasia, and beyond, through infrastructure and energy
projects as well as digital connectivity. The BRI has generated a global debate
about whether China provides an “alternative Asian model” of development or
whether it is a “neo-colonial power,” and the CICC has become one focus of this
debate. Some academic commentators view the CICC as one means by which China is
expanding its judicial influence with implications for global governance via “BRI
jurisprudence.”

In an earlier essay,
I have written about the basic structure of the CICC, its jurisdiction,
enforcement concerns, and specific issues such as procedural language, foreign
expertise, and intake. In this post, I
want to update that earlier essay and to briefly discuss the most recent
regulations that further define the structure and operations of the CICC and
the first batch of cases accepted by the courts.

By way of background, the CICC, a product
of regulations
issued by the Supreme People’s Court (SPC), is billed as a “one-stop shop” (yizhanshi) for resolving “international
commercial disputes” of amounts of over 300 million yuan, between Chinese
parties and their counterparts, through litigation, arbitration, and mediation.
There are two observations about its jurisdictions: one, the CICC is intended
for cases not limited to those stemming from the BRI. Two, the CICC is not
mandatory for BRI deals; rather it is one option amongst an increasingly
competitive field of dispute resolution forums in Asia. As such, the CICC is
part of a new generation of hybrid dispute resolution mechanisms, part of what
I the “new legal hubs.” The
CICC seeks to draw on the strengths of different channels of dispute
settlement, yet in doing so, there is some lack of clarity. Confusion is
apparent in the name of the institution. Whereas the SPC has translated the
institution’s English name as “courts,” in reality, they are “tribunals” (fating) as the SPC has authority only to
establish tribunals and not courts. The difference is that a decision of a
tribunal is effectively a decision of the SPC, and there is no appeal, although
parties can apply for a retrial in the SPC’s No. 4 Civil Division.

In terms of venue, the CICC is comprised of
two courts, one in Shenzhen and the other in Xi’an. These two municipalities correspond
to the maritime “road” and the overland “belt,” respectively. In terms of dispute
settlement, on the litigation side, the courts feature fifteen judges, all from
the SPC. To internationalize the institution,
the CICC also features an International Commercial Expert Committee of twelve
PRC and twenty non-PRC legal professionals, experts mainly in mediation and
arbitration.

In the latter half of 2018, the SPC issued
a number of regulations that provide further details about the workings of the
CICC. The most notable features are the
following:

There is a “case management
office” to coordinate dispute resolution between the different channels of
dispute resolution.

There are a number of implications of and
questions raised by the regulations. First, as each of the arbitration and
mediation institutions is a domestic PRC organ, it is clear that the CICC
operates as a platform to further internationalize these institutions. Second,
procedurally and institutionally, there is an emphasis on mediation. This
emphasis accords with the creation of the International Commercial Dispute
Prevention and Settlement Organization, under the CCPIT, announced
at the Second Belt and Road Forum for International Cooperation in Beijing on
April 25-27, 2019. While details about this most recent institution are
forthcoming, it is known that it will prioritize mediation.

However, the relationship between the CICC and
the existing institutions is still nascent. Specifically, it is unclear why
parties would opt for arbitration under, for example, SHIAC via the CICC when
they could go directly to SHIAC. It is further unclear if an award given by a
body like SHIAC would be converted to or recognized as a judgment by the SPC
and, second, what this recognition would give the parties provided that
arbitral awards given by arbitration institutions have greater likelihood of
enforcement abroad under the 1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards than do SPC judgments. This matters when
drafting the dispute resolution clause in the relevant commercial contracts. To
date, CICC has not issued language for a model clause, as is customary among
arbitration institutions. Additionally, it is uncertain, given that the CICC
has privileged party autonomy, what the role of the “case management office”
is.

On December 29, 2018, the CICC announced it
has received its first batch of cases. The Shenzhen court has received
approximately five cases and the one in Xi’an approximately four. All of these
were cases that had been received by the SPC and were subsequently handed down to
the CICC, as no case yet is the result of specification for the CICC in the
parties’ contracts. This pattern is not surprising for international commercial
courts. For instance, it took the Singapore International Commercial Court (SICC)
some three years before it heard its first case that was the result of the
parties choosing the SICC as their forum for dispute resolution. Prior to that,
the SICC received all its cases by transferral by the Singapore High Court.

In terms of nature of disputes, three of
the Shenzhen cases concern applications concerning the validity of arbitration
agreements, one is a dispute over product liability and another concerns unjust
enrichment. For the Xi’an cases, two concern disputes over liability for damage
of a company’s interests and the others concern equity determination and profit
distribution disputes. Interestingly, none of the cases is necessarily a “BRI
dispute;” for example, a Xi’an case is a continuation of a drawn-out legal battle
between Thailand-based T.C. Pharmaceutical Industries Co. Ltd. (which makes the
energy drink Red Bull) and its Chinese counterpart.

All of the cases are still on the
proceedings. In an exercise of transparency, there have been a couple of announcements
about court actions, including one, dated
April 4, 2019, concerning the consolidation of three related requests to the
court to confirm the validity of an arbitration agreement and the second, dated
May 6, 2019, regarding a pre-trial meeting for a product liability case. In
that latter announcement, the CICC reports that the parties agreed on pre-trial
mediation by the International Commercial Expert Committee.

Looking ahead, it is likely that the CICC
will grow slowly. Among seasoned lawyers in China, there is scepticism towards the
CICC as to whether it can gain international legitimacy and also provide
dispute resolution services that are otherwise unmet by existing options for
international commercial arbitration. This is somewhat striking given that in
the U.S. and its allies, among some experts, there is a kind of fascination with
the institution (see e.g., “BRI jurisprudence” above). Nonetheless, beyond the
symbolism of establishing an international commercial court, the CICC will potentially
serve as a learning device writ large, a means of two-way socialization to both
increase foreign parties’ awareness of and appreciation for Chinese legal
institutions and Chinese legal and judicial experts’ exposure to best practices
in international commercial law.

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About Author

Matthew S. Erie (J.D., Ph.D.) is an Associate Professor of Modern Chinese Studies and Associate Research Fellow of the Socio-Legal Studies Centre at the University of Oxford. Professor Erie’s interdisciplinary work stimulates conversations between law and anthropology to understand the role of normative pluralism in international ordering, with a particular focus on China. He has written extensively on Chinese domestic law (e.g., property law, constitutional law, and ethnic and religious policy) and China’s impact on international law (e.g., dispute resolution, conflict of laws, anti-corruption law, and investment law) in such journals as the Virginia Journal of International Law, American Journal of Comparative Law, Law and Social Inquiry, and American Ethnologist. His first book, China and Islam: The Prophet, the Party, and Law (Cambridge University Press 2016) is the first ethnographic study of the relationship between sharia and state law in China. His current research, funded by a European Research Council Starting Grant, examines China’s approach to law and development in weak and fragile states. Professor Erie previously held academic positions at Princeton University and NYU Law School, and he was a visiting scholar at the National University Singapore Law Faculty. He is a member of the National Committee on US-China Relations, and practiced law in New York and Beijing.